Consumer sentiment unexpectedly falls on outlook

WASHINGTON – Consumer confidence in the U.S. unexpectedly dropped in March to a four-month low, indicating household spending may be slow to pick up from a weather-related setback earlier this year.

The Thomson Reuters/University of Michigan preliminary index of sentiment fell to 79.9 this month from 81.6 in February. The median estimate in a Bloomberg survey of economists called for the measure to increase to 82.

Consumers surveyed were more pessimistic about the outlook for the economy, indicating bigger payroll gains that lead to faster wage growth are needed to propel spending. At the same time, fewer job cuts, higher home values and stocks close to a record will help keep sentiment from faltering.

“The winter weather is not a reason to get rosy about the economy or personal finances, so we’re seeing consumers hold here,” said Sean Incremona, a senior economist at 4cast Inc. in New York, who projected a decline in the gauge to 80.5. “The job market should continue to improve, albeit at a moderate pace, and we hope eventually we will see increased wages, which will be the real factor to drive spending and sentiment.”

Estimates of the 68 economists in the Bloomberg survey ranged from 79 to 84. The index averaged 89 in the five years before December 2007, when the last recession began, and 64.2 in the 18-month contraction that followed.

Producer prices

Another report on Friday showed inflation at the producer level cooled last month. The Labor Department’s producer-price index unexpectedly decreased 0.1 percent in February after a 0.2 percent advance as the cost of services fell by the most in almost a year.

Stocks rose after the figures as investors watched developments in Ukraine. The Standard & Poor’s 500 Index advanced 0.1 percent to 1,848.59 at 10:48 a.m. in New York.

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